EUR/USD In the Balance

Monday 22/10/2012

Daily chart

• With Moody negative outlook and Spain Credit affirmed at Baa3
• The risk assessment to purchase out Spanish government bonds to control price volatility 

• Credit line Open to Spain by the (ESM) European stability Mechanism
• This should help Spain sustain demand for Spanish government bonds and allow the ECB to activate it outright monetary Transaction (OMT) program of the secondary market

• ESM Positive out come last week: this will allow for gradually reducing the large deficit and debt burden.

• The On going progress towards restructuring the Spanish banking sector and enhancing the solvency of the affected banks is another positive and should restore confidence.

• ECB summit Meeting last week reached an agreement that the ECB should regulate the Spanish banks but market is still mixed as to what the regulation will look like.

• The dollar was also gaining as investors eyeballed the European Union summit for news and braced for some disappointment on banking supervision. The European Council said early Friday that it has set a deadline of Jan. 1 for agreeing a legislative framework for a single banking supervisor.

• The dollar was up lifted by the data. Strong greenback in turn tends to hurt dollar-denominated commodities such as gold.

• U.S. stock-market futures were pointing to losses for Wall Street after some disappointing earnings from Microsoft Corp. MSFT -0.32%   released after the close of trading Thursday.
• Europe stocks traded weaker across the board.

Summary

Pivot: 1.3075

My preference: Short positions below  1.3087 and with targets 1.3015 & 1.222 in extension.

Alternative scenario: Above 1.3087 look for further upside with 1.312 & 1.314 as targets.

Comment: the RSI is capped by a bearish trend line.

Key levels
1.314
1.312  key LEVELS TO WATCH FOR A LONG TERM FALL TOWARDS 1.22 
1.30109
1.3075
1.3024 last
1.3020   key LEVES TO WATCH FOR A SHORT TIME BOUNCE  BOUNCE TOWARDS 1.31 
1.3015
1.299
1.2955

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